Money laundering and terrorist financing - preventive measures in the finance sector

Finansinspektionen (FI) has studied how well companies in the finance sector are complying with the rules governing the combating of money laundering and terrorist financing.

The results of the study are discouraging. Many of the 133 studies undertakings are not complying with the legislation and regulations for the sector.

Over the years the Act on Measures against Money Laundering has come to cover more and more categories of undertaking. Because of this companies have had different amounts of time to adapt their business activities to the regulations.

The study shows that joint stock banks, a category which includes the estab-lished banks, are best complying with the rules on money laundering and ter-rorist financing. Compliance for other companies is in certain cases very poor. In order to combat money laundering the law regulates a company's internal management of its business operations. In this field the joint stock banks are very good, while the life insurance companies are not so good.

The life insurance companies, but also the majority of the credit market under-takings and investment firms, lack the training plans for their personnel that are required according to the Finansinspektionen regulations.

A responsibility to establish the customer's identity is central to the legislation. The life insurance companies generally display major shortcomings in this re-spect. Best are mutual fund companies, savings banks and joint stock banks.

The auditing of transactions is another area in which the study has shown poor results. The life insurance companies, investment firms and mutual fund com-panies studied did not report a single suspicious transaction to the Swedish fi-nancial intelligence unit (Finanspolisen) in 2005.

The study shows significant differences between the various categories of un-dertaking. FI is following up these results with supplementary studies into in-dividual companies and also specifically directed measures to remedy specific problems within a category of undertaking. Since 2005 FI has strengthened its oversight and the provision of information in this area, a prioritisation which will continue in 2007.

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